At long last the Treasury has announced that the marketing and sale of long term care insurance is t...
At long last the Treasury has announced that the marketing and sale of long term care insurance is to be regulated by the Financial Services Authority.
While no adviser will relish another layer of regulation, this news has to be welcomed. The cost of cover, coupled with the fact that claims are made at perhaps the most vulnerable stage of clients' lives, means the consequences of products being mis-sold can be extreme. Care costs can put at risk clients' homes and savings, not to mention their dignity and independence, so it is vital that products are sold correctly.
It is no surprise that product providers have welcomed this announcement with open arms. Statutory regulation will provide this fledgling market with a seal of approval from the Government, and no doubt boost confidence in the market.
Consumer confidence is something the long term care market desperately needs. Latest industry estimates suggest that, as yet, there are only 34,000 policies in force, which is disappointing for a market that has been in existence for some five or six years.
However, if the regulation is to meet its objectives it needs to be well thought out. It is for this reason the industry is thankful that the Government chose not to introduce CAT marks ' an initiative that would have hindered product development in a market that is still in an embryonic stage.
But there is concern that creating a workable definition of what constitutes a long term care product could be difficult ' especially since the Government has chosen not to regulate critical illness (CI) and income protection (IP).
Some IP policies, for example, can pay benefits for the remainder of a client's life and with CI paying out on certain disabilities, product boundaries may blur.
And because all three products fall into the same class of long term care insurance, there is a concern that IP and CI may end up being regulated by default.
While the consumer lobby may welcome this, in practice the cost implications could make two highly valuable products unaffordable to many.
